Floor Plan Lending Definition

Floor plan lending is a form of inventory financing for a dealer of consumer or commercial goods in which each loan advance is made against a specific piece of collateral.

Floor plan lending definition.

Retail floor planning also referred to as floorplanning or inventory financing is a type of short term loan used by retailers to purchase high cost inventory such as automobiles. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. The floor plan facility allows the automobile dealer to obtain financing for automobile inventory. This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending.

Advances under the facility are made against specific automobiles as collateral. Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources. What you don t realize is that like most new car dealers a floor plan was used to finance the cars. How to pronounce floor plan lending.

These loans are often secured by the inventory purchased as collateral. When each automobile is sold the loan advance against that particular piece of collateral is repaid. Supplementing working cash with a floor plan is a tried and true method to grow business. Financing the operations of a car dealership requires a specialized type of loan called a floor plan line of credit.

Floor planning is a type of inventory financing for large ticket retail items. This booklet applies to the occ s supervision of national banks and federal savings associations. Much like a credit card a floor plan financing company extends a line of credit to a car dealer. Local dealerships purchase their inventories through financing called floor plan lending here s how it works.

Floor planning is commonly used in new and used car dealerships. Find out how nextgear capital dealers are tackling the challenges of today s market head on by properly utilizing their lines of credit.